How This Works
What Goes Into Calculating Your Loan Eligibility
When a bank decides how much to lend you, they do not just look at your salary and multiply it by some number. They look at multiple factors together and the final amount is a result of all of them working in combination. This calculator uses the same core parameters that most banks in India rely on.
FOIR: The Most Important Number Most People Have Never Heard Of
FOIR stands for Fixed Obligation to Income Ratio. It is the percentage of your monthly income that a bank is willing to let go towards loan repayments. Most banks set this between 40 and 55 percent depending on the loan type.
For a home loan, banks typically allow up to 55 percent FOIR because it is a secured loan against a property. For a personal loan, which has no collateral, the threshold is tighter at around 45 percent. Car loans sit around 50 percent.
If your net salary is Rs. 60,000 and the bank applies a 55 percent FOIR for a home loan, your total monthly loan obligation ceiling is Rs. 33,000. If you already pay Rs. 8,000 in another EMI, the remaining available EMI for the new loan is Rs. 25,000. That available EMI is what determines your maximum eligible loan amount.
How Credit Score Changes Your Interest Rate
Your credit score does not just affect whether you get approved. It directly affects what interest rate the bank offers you. A person with a score of 780 applying for a home loan might get 8.5 percent. The same person with a score of 665 might be offered 9.8 percent or higher.
That difference in rate, compounded over 20 years on a large home loan, can amount to several lakhs in extra interest. This is why improving your credit score before applying for a major loan is one of the most financially impactful things you can do.
Why Your Age Affects the Eligible Tenure
Banks cap your loan tenure based on your retirement age, typically assumed to be 60 for salaried individuals. If you are 45 years old and apply for a home loan, the maximum tenure most banks will offer is 15 years. A shorter tenure means a higher EMI for the same loan amount, which reduces the loan amount you are eligible for at your income level.
Why This Is a Range and Not a Fixed Number
The result shows a range because the interest rate itself is a range. Within any credit score band, different banks offer slightly different rates based on their internal policies, your relationship with the bank, and current market conditions. The lower end of the loan range corresponds to the higher end of the rate range and vice versa.
What This Calculator Does Not Account For
This tool gives you a well-informed estimate. But there are factors it cannot capture. Your employer's reputation, your existing relationship with the bank, any negative marks on your credit report beyond the score range, and self-employment income which banks evaluate differently from salaried income. Use this as a starting point before walking into a bank.